Restructuring, GM Style: Opel Slashes Jobs and Demands State Money

Restructuring, GM StyleOpel Slashes Jobs and Demands State Money

General Motors Europe on Tuesday finally announced the details of its plan to restructure German car-maker Opel. In addition to thousands of job cuts, GM wants 2.7 billion euros from European governments. Opposition to the plan is building in Germany.

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General Motors has presented its plan to save German auto-maker Opel. But it calls for billions of euros of state aid.

It has been months in the making. But finally on Tuesday, Nick Reilly, head of General Motors Europe, announced the details of his plan to slim down the company's European unit Opel and return it to health. As expected, the radical restructure calls for significant job cuts, considerable salary slashes and extensive aid from European governments.

"We have a plan that we believe will help us rebuild long-term profitability," Reilly told reporters at a press conference in Frankfurt. "We do need more help from European governments."

Specifically, GM is asking for 2.7 billion ($3.7 billion) in loans or loan guarantees from countries where Opel factories are located. Germany would be responsible for coming up with 1.5 billion of that amount, with half coming from the federal government in Berlin and the remaining amount being coughed up by the German states concerned.

In total, some 8,300 jobs are set to be cut across Europe, with 3,900 jobs to be slashed in Germany. While no additional factories are to be closed down -- the closure of Opel's plant in Antwerp, Belgium was announced in January -- the Opel factory in Bochum, Germany will lose 1,800 jobs.

Ball in Europe's Court

According to information obtained by SPIEGEL, Reilly also plans not to replace some 1,000 additional workers set to go into retirement.

Reilly's announcement once again puts the ball in the court of European governments. Last spring, Berlin spent weeks trying to come up with a plan to save Opel when it became clear that its parent company GM was heading for bankruptcy. Finally, a plan was cobbled together which foresaw the carmaker being sold to the Canadian-Austrian auto parts maker Magna and its Russian partner Sberbank. In November, however, GM changed its mind and decided to hang on to Opel.

Whether Berlin, German state governments and other European governments will be eager to come up with cash for Opel remains to be seen. Roland Koch, governor of the state of Hesse, told Dow Jones newswire on Tuesday that he was skeptical of the plan.

"We will take a very close look at the plan presented today from GM," he said. "According to our first impression, it will be necessary for GM, as the owner, to considerably increase its contribution to the restructuring." GM has said it will provide 600 million of the 3.3 billion it says is needed to keep Opel operational.

Outraged Workers

Money from the federal pot may likewise be difficult to access. Assistance for Opel would come from the 115 billion German Economic Fund, put together to help German businesses struggling as a result of the financial crisis. There are, however, a number of criteria that must be fulfilled before companies can access that fund -- one of those being that the company must have been in good economic shape prior to the crisis. It is unclear whether Opel qualifies.

Another key component of the plan likewise looked to be in doubt on Tuesday. Reilly has demanded that labor unions forego 265 million worth of annual pay over the next five years. Unions have refused, unless GM hands the workers a share of the company and grants unions a say in further factory closures and job cuts. Opel workers were already outraged by GM's decision to slash jobs and close down the Antwerp factory. Currently, no further talks between labor and GM are scheduled, according to a report in Die Welt on Tuesday.

Reilly is hoping to return Opel to profitability by 2012, primarily via a complete overhaul of Opel's product line. A slew of new models are to be introduced this year and next with the battery-powered Ampera set for release next year.